Gordon turns the spotlight on the fat cats

AS SO often, the most interesting and potentially significant politics is happening outside the conference arena. It is too early to be sure, but it is just possible that Labour's much-maligned Treasury team has thought its way through the terrible taxation trap which lost Labour the 1992 election. If this is so, the political implications are huge.

For months now, former Inland Revenue staff have been working for Labour on corporate taxation and loopholes in current tax. Gordon Brown now thinks he has a package of proposals that would raise pounds 8bn over two years. A series of parliamentary clauses for this winter's Finance Bill has already been drafted. Even supposing he is grotesquely over-estimating the money that can be clawed back, recall that putting VAT on domestic fuel raises only a quarter of that.

Labour already has parts of a political agenda that plays well beyond its northern and Celtic fastnesses. The belief that 14 years of Conservative government have produced an over-centralised, seedy, even undemocratic style of politics is widespread. The keynote policies of John Major's government, rail privatisation and VAT on fuel, are outraging the southern counties and suburbs as well as the North.

With one poll showing opposition to the latter running at 92 per cent and with Baroness Thatcher now on the attack, this is an issue that could cause the Government almost as acute pain as did the poll tax. It is serious politics, even if the Chancellor announces a package of relief measures next week. They tried that too, remember, with the poll tax.

Across the country, large numbers of Tory councils have passed motions against the VAT measures. The last parliamentary vote on the issue saw the Conservative majority fall to eight; Labour has been given the go-ahead from the Westminster clerks for a procedural attempt in the Commons this winter to stop the tax increases before fuel bills are sent out.

All this is interesting enough, but is only oppositional politics. Voters, after all, cheered on Labour and the Liberal Democrats when they led the charge against the poll tax. But when it came to the general election, they judged the parties by other criteria, notably by their income tax policies. Next time, it will be rather harder for the Conservatives to run 'tax bombshell' campaigns. But the fear of the southern middle classes about Labour taxation remains one of the great political divides.

For Labour to turn the Conservatives' high-tax record to real advantage, it would have to persuade at least some of the people for some of the time that it had found a less painful way to tax. Thus far it has found the job too difficult. When left-wing Labour MPs struggle with tax, they turn to raising income tax rates and scrapping mortgage interest tax relief - neither exactly vote-winning proposals.

Hence the significance of the Brown package. It includes some familiar ideas, such as a windfall levy on 'excess' profits from privatised utilities and the reversal of the Government's decision to abolish stamp duties on share transactions. The Labour team also thinks it could find pounds 1bn by closing corporation tax loopholes, could tighten up on inheritance and capital gains tax, and plans to end the special position of privatised water companies, which currently pay almost no corporation tax.

Other targets would include the expensive and abused Business Expansion Scheme and executive share options used to avoid income tax. Mr Brown says he would implement Inland Revenue proposals to tighten the tax treatment of rich foreign citizens living in Britain and to apply capital gains tax and income tax to offshore trusts. Finally, he would end the tax subsidy for private medical insurance for the elderly.

All tax causes pain. These proposals would harm many citizens and cause job losses. Some would backfire. Others would probably raise rather less than Mr Brown hopes. But their political attraction ought to be glaringly obvious. They seem to leave middle-income Britain largely alone. They reinforce the belief, already widespread, that the Conservatives have left large swathes of corporate and high-income Britain virtually untouched, while imposing painful spending taxes on ordinary people.

So even if the Conservatives were able to mount a successful counter-attack, stressing job losses, the threat to pensioners' incomes and investment in utilities, they could find themselves sounding rather too sophisticated, even defensive. That would be a novel experience. I would guess that a large majority of voters, even in the South, already think big, anonymous corporations and fat cats have got off too easily for years. Resentment stalks the land.

The first serious opportunity for the Government to test and challenge the Brown approach will come during the winter debates on the Finance Bill. A series of detailed clauses to enact some of the proposals listed above has already been drafted. Before dismissing them, ministers should recall that the last Labour package of loophole-closing measures was snapped up by the former Chancellor, Norman Lamont.

It may all fizzle out. It may

be that voters cannot be persuaded to believe a Labour government could rule without imposing much higher direct and indirect taxes on ordinary families. Some in the Shadow Cabinet clearly agree. There is a sharp argument in progress. But if Mr Brown and his colleagues can direct the tax argument towards corporate Britain, they could have made a real difference to their party's chances. More of a difference than anything said or voted upon in the blue, smoky pall of the Labour conference hall this week.